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Building the economy we could have: Predistribution

To build the better economy we could have in Australia, we need to think differently. Dr Katherine Trebeck, economist and Economic Change lead, is a big fan of predistribution. Here she explains why. 

I often use a ‘jigsaw puzzle’ as a metaphor to explain the array of shifts in policy and practice needed to build an economy in service of people and planet. No single piece is sufficient on its own, but together, enough changes have potential to build towards to an economic system that gets things right for people and planet first time around. 

To grapple with this array of actions, it can help to loosely cluster the pieces into the four corners of that jigsaw puzzle: the ‘4Ps’ of purpose, prevention, predistribution, and people power. 

Here, I want to offer a few notes on the predistribution corner as it is so often missing from the conversation about the economy, with focus instead on taxation and how to better fund programs for those who are impacted by the inequalities built into our current system (‘compensating the losers’ as a report from a US think tank rather bluntly puts it). 

Australia used to do fairly well in terms of predistribution (that is, for white, able-bodied males). But no longer; we’ve become an ‘assetocracy’ where access to assets tends to be what shapes peoples’ life chances and life choices.

Credit: Jess Harwood, for The Next Economy

Predistribution is about pre-emption and prevention, and a critical element of upstream change that builds a better economy for all of us.  

‘It is not enough to…try to balance the inequalities generated in the market through retrospective tax and transfer. It is necessary to transform and democratise the institutional content of the market economy, rather than just compensate for its inequalities.’ – Gabriella Ramos et al 

Origin story 

The term predistribution was coined by the American scholar Jacob Hacker who describes it as ‘market reforms that encourage a more equal distribution of economic power and rewards even before government collects taxes or pays out benefits’.  

Predistribution’s political moment in the sun came in 2011 when Ed Miliband, then leader of the UK opposition Labour party, was in the audience for a speech that Hacker gave in Oslo. Miliband returned to the UK and – briefly – championed the idea. 

But predistribution is one of the most important ideas that should be high on the political agenda. Let’s look at why it matters, what it is, how it plays out in practice, and the implications for policy. 

What does predistribution mean? 

The essence of the idea of predistribution is ensuring that the market economy does more of the heavy lifting in delivering a more balanced divvying-up of resources. British scholar Martin O’Neill explains it as ‘the particular ways in which the economy can be shaped to disempower the privileged and to empower the disadvantaged’. Its focus is on market mechanisms that determine the distribution of wages, profits, and other flows and stocks of money.  

Government comes into the predistribution story via its role in creating and shaping markets so that the results are aligned with public goals: using rules, incentives and other levers to shape market outcomes. This includes boosting (or curtailing) the bargaining power of market players such as workers, employers, and wealth holders.  

Therefore, it differs from government using tax and benefits to shape the distribution of economic resources after market outcomes have emerged: this is redistribution.  

We’ll come to some specifics in a moment, but you could expect to see predistribution in the form of:  

  • Strong standards for workers (such as regulation, procurement, support for unions, and living wages). 
  • Regulation of the financial system and corporate governance; including provisions to stop harmful activities.  
  • Ensuring more people have a share of capital ownership, including owning businesses via worker or commubity cooperatives. 
  • Spending to bolster people’s opportunities and bargaining power in the labour market (think education and other public services: so they are not dependent on someone’s income) and groups like unions who can stand up for workers. 
  • Addressing how affordable certain goods and services are (for example, via price caps, subsidies, or direct provision): rather than only focusing on how much money is in people’s pockets; also being concerned with how far it stretches. 

Why it matters 

Inequality arises in and can be addressed via two realms. Firstly, what is sometimes called the ‘primary’ realm of work, wages and occupational pensions, and then in the secondary realm comprising taxes and benefits. Predistribution is about action in the primary realm. Here the wages that workers earn are the outcome of ‘a complex process of implicit and explicit bargaining between workers, employers, and (where they exist) unions’: the influence of each compared to the others matters, and is a function of various rules and regulations. 

This is of interest to anyone interested in economic inequality because this realm is where the bulk of the balance or imbalance of economic resources arises: the ‘biggest single factor in determining the distribution of market income is the relative shares going to wages on the one hand and to capital incomes (rent, interest, dividends, and capital gains) on the other’.  

In Australia, ‘capital gains arising from accumulated wealth have produced large increases in passive, unearned income that have added further to the wealth of the rich‘.  

Evidence from around the world bears this out too: in global terms, four fifths of inequality stems from what was going on prior to the government getting involved via tax and transfers, with only one fifth being the result of tax and transfers. The lower levels of inequality in Europe ‘cannot be explained by more equalizing tax and transfer systems… “Predistribution”, not “redistribution,” explains why Europe is less unequal than the United States’, according to Blanchet, Chancel and Gethin.  

So, there are a range of reasons which mean that predistribution is worth focusing when thinking about how to achieve a more balanced distribution of economic resources: 

  • Redistribution is not enough. As Hacker says, taxation and benefit payments ‘cannot do the work on their own’. 
  • Predistribution, in contrast, does not require government to spend substantial quantities of public money. Instead, in reducing inequality at source governments can generate fiscal savings by reducing the need for spending downstream (on benefits), thus freeing resources to spend elsewhere.  
  • There are a range of real politik reasons why redistribution is harder to pull off:  
  • Policies that are about spending (for example welfare payments) are challenging politically given concerns (reasonable or otherwise) about budget deficits and overall debt.  
  • Governments that do seek to be proactive on the redistribution front often face resistance and even backlash, as Hacker describes. He explains that the wealthiest have a tendency to complain – loudly – about increased taxes on their income and wealth.  
  • On the other hand, it is often easier to harness the ‘political space’ for action on predistribution measures than it is for taxing and benefits provision. 
  • Finally, although not noted by its original proponents, predistribution also matters because of the growing recognition that economic growth-based agendas are incompatible with keeping the world’s environment within planetary boundaries. Redistribution tends to rely on the economic growth: grow, tax, and spend back via welfare. So taking the science around the environmental limits to growth seriously compels consideration of mechanisms to ensure a good life for more people without having to rely on the grow and redistribute recipe. 

Implications for action  

Convinced that predistribution is worth getting behind? Superb. What might you want to think about encouraging – or, if you happen to work in the right place in government, actually implementing? 

Actions that policy makers need to be prepared to implement to promote predistribution include: 

  • Support for worker owned cooperatives (for example, via reduced taxes, simplified legislation, and education of ancillary services so they are more supportive of cooperatives). 
  • Legislation for worker rights and conditions (such as job security, being able to request flexible schedules and access to paid leave for family care). 
  • Regulations to strengthen the position of trade unions (what Hacker describes as a ‘countervailing power’) and corporate governance that puts workers on company boards. 
  • Enactment, and enforcement of minimum wages set at the level of living wages. 
  • Curbing extremes of high pay (for example, increased taxes when CEO to median pay exceeds a certain ratio). 
  • Broad based service provision that bolsters people’s endowment of human capital (such as decent education, vocational training, and health services). 
  • Addressing affordability of basic needs (for example, via provision of affordable housing, price caps on important services, and competition policy). 
  • Support for people who would otherwise struggle in the labour market to access good jobs (perhaps even a job guarantee). 
  • Regulation of financial markets and promotion of financial stability: for example, of how financial institutions behave (reducing high frequency trades, for instance); shifts in corporate governance; and ensuring capital flows to productive activities (rather than subsidising harmful activities and products). 
  • Promotion of fair trade. 
  • Public procurement with social goals in contracts. 

Conclusion  

Predistribution is a critical lever for generating a more balanced distribution of wealth. It’s an upstream mechanism that heads off inequality before it arises by shaping market outcomes to be fairer, rather than depending on government to even things up once inequality has emerged. There are a range of actions governments and other economic players can take to predistribute economic resources. Now it’s time to start talking about it more and putting the changes in place to make the most of its potential to create the economy we could have! 

NB A shorter version of this piece appeared in The Point: https://thepoint.com.au/opinions/260428-redistribution-or-predistribution-another-way-to-think-about-tackling-inequality  

Download our printable/shareable resource about Predistribution.

Predistribution Explainer

Read ‘The economy we could have’: https://nexteconomy.com.au/work/the-economy-we-could-have-new-paper-out-now/

Check out the series: https://nexteconomy.com.au/work/new-series-building-the-economy-we-could-have/

Investing in regions to unlock the transition

Australia is currently navigating a fundamental transformation of its energy system, shifting from a fossil fuel past toward a renewable future. Our regional communities are at the frontline of this change, hosting the infrastructure, resources and workforce that will determine our national success. 

Our In Brief: Investing in regions, unlocking the transition series offers financial decision-makers across government, investment and philanthropy a high-level entry point into regional investment and its role in Australia’s transition to a climate-safe, regenerative and socially just economy. 

The series grew from an investor experience in Gladstone in 2024 and has since expanded – in geography and subject matter – drawing on work across regional Australia, desktop research and expert contributions. 

Each brief provides a bird’s-eye view of a focus area, including key barriers and where support is most needed. Current topics include: 

  • Decarbonising and increasing the capacity of the grid 
  • Developing green export industries 
  • Regional investor insights from Gladstone 

These briefs are a starting point – designed to spark conversation, build shared understanding and support deeper discovery. Because these topics are interconnected, effective progress requires a whole-of-system approach and close coordination across sectors. 

As this space evolves rapidly, we welcome your feedback to keep the series current and useful.

Decarbonising and increasing the capacity of the grid 

Australia’s electricity power system or “grid” is the vast transmission and distribution network that transports electricity from generators to consumers. Right now it is undergoing a fundamental transformation from its fossil fuel origins toward a renewable future.

Download

Regional investor insights from Gladstone 

Industrial regions are central to Australia’s net zero ambitions. They host the resources, infrastructure and workforce that will determine whether the energy transition succeeds. Gladstone, an industrial heartland with exposure to emissions-intensive and trade-exposed industries, is on the frontline of the global energy transition. 

Download

Developing green export industries 

The global shift to net zero emissions is the defining economic and industrial transition for Australia this century. While the value of Australia’s emissions-intensive exports will decline with global demand for fossil fuel, the global energy transition also creates enormous potential for new industrial growth. Early and coordinated investment can position Australia as a leading global supplier of green commodities and advanced manufacturing components. 

Download

New series: ‘Building the economy we could have’

‘Building the economy we could have’ – A series of ideas, case studies and concepts exploring how we move to an economy that works for people and planet. 

Australia’s future depends on whether we can move beyond piecemeal reforms to embrace systemic change. 

Last year, we released The Economy We Could Have – a paper that looks under the bonnet of Australia’s economy: rising inequality, the erosion of the ‘fair go’, but also a story of hope. Of momentum growing across the country, and of enterprises and communities already leading the way. 

The response was one of excitement, speaking to a deep desire for transformative economic change rather than the same old, tired recipes. Now, with Australia facing new economic pressures including an oil crisis, the impetus to act is greater.  

Cartoon by Jess Harwood for The Next Economy

So, we are doubling down. The ideas that politicians and decision makers reach for in a crisis matter. We want those ideas to be the ones that put wellbeing at the centre: dignity, purpose, participation, fairness, and nature. As a foundation, rather than an afterthought.  

That’s where our new series comes in. 

Building The Economy We Could Have explores the ideas, case studies and concepts that show how we get there. Right now, there are many isolated or ‘Lego wins’, the examples that show what can be done better, yet scattered and disconnected. We are turning our focus to see these as building blocks: things worth doing more of, and connecting across the country. 

We’ll share examples that show another way is possible and outline the potential of wellbeing economic concepts in practice, with case studies, explainers, interviews, and of course drawing on our work in regional communities looking to build resilient and thriving communities through times of change. ‘ 

The series includes:  

  • Explainers on wellbeing economy concepts and how they are showing up in Australia 
  • Case studies of enterprises, communities and policy makers doing differently 
  • Australian history showing we have charted different approaches before 
  • Interviews with people bringing fresh ideas and approaches. 

We are excited to uplift the work that is steadily charting the way forward, drawing on Australian’s strengths as people who back their neighbours, champion local ideas, and have a long track record of showing the world what policies that work for people and planet can look like.  

This series is a starting point for deeper thinking and conversation. We’d love to hear what resonates, or what we are missing. Contact us here.

Read our first case study:

Earthworker Cooperative Network

Read our first explainer:

Predistribution

What freight decarbonisation means for regional Australia

Land Sector Program Lead Jacqui Bell ponders what freight decarbonisation means for regional Australia off the back of a commercial vehicle decarbonisation summit at Parliament House. 

Our Land Sector Program Lead Jacqui Bell attended Freight Forward summit on commercial vehicle decarbonisation at Parliament House on 30 March 2026, hosted by Energy Futures Foundation. This event could not have been timelier, as we grapple with fuel security as a nation. It’s also deeply relevant to our work with regional communities here at The Next Economy. 

Jacqui heard how Australia imports 90% of our transportation fuel and moves more freight per person than any other country. She also learnt that 98% of businesses in Australia’s freight transport system are owned by small to medium businesses, 2% by owned by large corporate freight and logistics operators. Those big businesses have the power to send signals down the supply chains to make the transition work, but those signals must be backed by investment, education and support to shift. 

Jacqui at Parliament House on Monday 

Here are some more of Jacqui’s reflections post-summit about what she heard and what this might mean for our work with regional communities. 

I’m really curious about the “lopsided economics of transport” (to quote Transport Workers Union National Secretary Michael Kaine). While large logistics companies move a significant share of Australia’s freight through linehaul networks, the system relies heavily on small and medium operators (think local businesses and independent drivers) to complete last-mile delivery and provide regional coverage from depot to door/gate. They make up around 98% of freight businesses in Australia and are critical to how the freight system actually functions.  These businesses are embedded within large supply chains, not separate from them. Additionally in many regions there are more unlikely suspects that will be affected by the sector transition – think the farmer who owns machinery and trucks or the locally owned and managed service station which plays a role similar but different to the local pub.  

Australia’s freight and logistics system in Australia is important for regional Australia and communities. Australia’s freight system in many cases keep regional economies moving, and are critical to the viability of local industries and businesses and local spend. Changes in this sector aren’t going to just impact the trucks we see on the road or how and where they charge to ‘refuel’, sectoral change in technology, ownership, power and system design have the potential to create a ripple effect or more likely a tsunami of impacts for other regional communities, local businesses and industries, regional economies and serviceability across more rural and remote parts of Australia.  Not to mention have significant implications for other sectors in transition such as energy. 

There are practical challenges for freight decarbonisation in regional Australia. Much of our local infrastructure, like roads and bridges, are no longer fit-for purpose for the future transport and freight system we need to transition well. There’s also questions about energy access including poles and wire infrastructure, which is not reliable or extensive enough to provide energy where it is going to be needed. There’s the fragmentation of the industry between technologies, ownership, scale and size. And that’s not to mention the practicalities of dealing with digitisation of machinery, and their serviceability etc. We hear of farmers who are stockpiling trucks and machinery because malfunctioning digital systems in machines are too disruptive for day-to-day operations. 

While there are challenges, there are also opportunities. Regions like Hay in NSW could be partners for investment; they have space for microgrids, potential for their own energy production (e.g., wind turbines) and the region is already strategically located on major trucking routes. How do we support a region like Hay to establish its own charging and servicing infrastructure and move away from providers just ‘coming in over’, doing their own thing and taking spend out of the local economy? 

We need regional voices. They need to be in the room and around the table of these conversations to make sure that workers, and small to medium business owners and regional agencies are part of the process and involved in shaping the solutions.  

This conversation goes beyond reducing emissions. Freight is one of the biggest vulnerabilities to our nation’s economy, and its decarbonisation is also about building resilience. 

The transition of the sector is probably going to require a mix of technologies. It’s not just electrification of vehicles, but there may also be discrete roles for green hydrogen and biofuels in some cases (although the jury seems still a bit out on this). It is a question of the right mix – the right trucks for the right segments. 

Ultimately, this is not a technical challenge; this is a socioecological challenge.  The technology is here for decarbonisation of freight and many commercial vehicles are due to be changed over. This is an implementation challenge. Some stats suggest we are in a ‘window of opportunity’ where a large number of vehicles are due to be upgraded in the next 5 years; the push is to shift from diesel to EV now. While there is a high upfront capital price, ongoing fuel prices make the shift favourable. Panels from Woolworths, Fortescue, and IKEA, for instance, noted that the business case (for transition) stacked up even with pre-crisis prices. But how do we support this to happen? There was a lot of talk about misinformation, knowledge, and understanding. 

There’s a big question around the overall design of the system. Air Vice-Marshal John Blackburn, former Deputy Chief of the Air Force, current Chair, Institute for Integrated Economic Research Australia made this point, noting we appear to be arguing the components. There was also much discussion about charging infrastructure, the need for it, how to roll it out and who owns and accesses it. What will this mean for the majority of small to medium businesses that need to use that infrastructure? 

My final take home is that there is different work that needs to be done in this moment. We need to navigate through this crisis, making sure that we don’t lock ourselves into something we can’t easily undo.  And then we need to get realistic about a ‘funded’ transition that is fair, sustainable, keeps people safe, keeps the industry viable, and supports regional communities and economies. 

Questions I’m still thinking about: 

  • What happens to small ‘Ma and Pa’ independent fuel stations who play such an important role in regional communities? 
  • How do we take care of society of our people and places as we transition so we continue to be a place that we want to live, where prosperity is shared? 
  • How are people in the sector thinking about these social elements of this challenge and transition?  
  • How can regions whose economies rely a large part on freight and logistics to keep their economy going, be a part of this conversation about enabling infrastructure and system redesign? 
  • If transport comes to a standstill and/or if it shifts into a totally different system that locks out local businesses and operators, how do we prepare communities and build the socioeconomic conditions and capacity required to endure and adapt? 
  • If most freight and logistics companies are run and owned by small to medium business owners around Australia, how do we support that system to move in a way that doesn’t involve carrying the cost burden of change without having a share in the rewards of moving? 

Making sense of the ISP 

The ISP runs to hundreds of pages and helps guide energy decisions across the country, yet few people read it. We chatted with climate and energy specialist Franzika Curran to break down its importance. 

The Australian Energy Market Operator’s Integrated System Plan, usually shortened to the “ISP”, is not the kind of document most people would pick up for a casual read. It is a large technical report full of modelling, forecasts and system planning – and it quietly shapes decisions that play out across the country. 

To help unpack what it is and why it matters, we caught up with climate and energy specialist Franziska Curran, who helped contribute to our recent ISP submission and who has spent time sifting through the hundreds of pages of the draft plan. 

Franziska, for people who have never heard of it – what is the Integrated System Plan? 

At its core, the ISP is a very large piece of analysis that asks a fairly simple question: what is the lowest cost way for Australia to meet its future energy needs while also meeting government policy goals? 

To answer that question, the Australian Energy Market Operator draws on years of data, modelling and consultation. It considers how demand might change, what kinds of energy generation are likely to be built, how much transmission will be needed, and how all of that fits together as coal power stations retire and new energy sources come online. 

The result is a long-term plan that outlines what the electricity system could look like over the next two decades, and what infrastructure would likely be needed to support it. 

It does not directly approve or build projects. Instead, it acts more like a map. It shows the pathway that planners, investors and governments are expected to follow when making decisions about new infrastructure. 

If it is a technical planning document, how does it shape what happens in real places? 

A successful energy transition requires a significant amount of new infrastructure. That includes new generation such as wind and solar, as well as the transmission lines that move electricity across the system. 

AEMO has a responsibility to plan for the transmission network needed to support that system and the ISP helps fulfil that role. 

By setting out the direction the system is expected to take, the plan sends signals to investors, network companies and planners about where new infrastructure will likely be required. Those signals then flow through into more detailed planning and investment decisions. 

Over time, those decisions shape what gets built and where. 

What changes when a project is labelled “actionable”? 

Within the ISP, some transmission projects are labelled as “actionable”. 

That label matters as transmission projects cannot progress through the regulatory approvals process unless they are identified as actionable within the plan. In that sense, the ISP acts as a gatekeeper. 

Once a project receives that designation, the project proponent can move into the next stages of regulatory approval and planning. Future versions of the ISP then continue to check that those projects still align with what the electricity system needs. 

Why do regional areas tend to host so much of this infrastructure? 

Much of the renewable energy Australia needs will be built in regional areas, and this is for a number of reasons.  

One reason is the quality of renewable resources. Wind and solar generation tends to be strongest in specific geographic areas. Building projects in places with strong resources allows the system to generate more energy more efficiently. 

Another factor is scale. Large renewable energy projects require significant land and are often built in clusters that make the most of existing or planned transmission infrastructure. 

Concentrating development in areas with strong renewable resources and suitable space can make better use of the network that connects them. If large projects were spread thinly across the entire country, significantly more transmission infrastructure would be needed to connect them all. 

What tends to determine whether this development benefits a community? 

For me, one of the most important factors is supporting local leadership. 

Where communities are actively planning for the future they want and organising around that vision, they are often better placed to shape the opportunities that come with new infrastructure. 

That kind of leadership can help ensure projects align with local development goals and that benefits are captured locally. 

That is also why I think the work of The Next Economy is so important. Taking the time to understand what communities want – and do not want – in  their future, making sure people have access to clear information about what is coming and how decisions are made, and helping communities articulate their priorities. This is so important in ensuring development supports local aspirations rather than working against them. 

What is often misunderstood about the ISP? 

For many people, the ISP can feel quite distant or abstract. It is a large technical document, and it can be easy to dismiss it or criticise it without looking closely at what sits behind it. 

But the plan represents years of analysis, modelling and consultation. It attempts to map out a pathway for a very complex transition, bringing together data about energy demand, infrastructure, technology and policy. 

It may not always make for easy reading, but it is a significant piece of work that plays an important role in shaping how the electricity system evolves over time. 

The final AEMO ISP 2026 is expected to be released in June this year.